[1] The method was conceived by Orit Gadiesh and James L. Gilbert, both consultants at Bain & Co. presented the following definitions: "the total profits earned at all points along the value chain of an industry.
Companies that see what others do not see, will be best prepared for capturing a larger share of the profits in an industry.
"[2] The idea states that managers need to look beyond revenues to see the shape of their industry's profit pool.
For example, the profitability of a segment may vary widely by customer group, product category, geographic market, and distribution channel.
The model is often applied to identify new sources of profit, to rethink the role of a company in the value chain, refocusing a company on its traditional sources of profit, and also applied when making product, pricing and operational decisions.